Anyone watching 12/8/06 meeting of the unelected Empire State Development Corporation (ESDC), with all of four board members (of seven, with one vacancy) in attendance could conclude that the project was rubber-stamped. Moreover, some board members had but a vague notion of project details.

But that wasn't the key decision made by the ESDC board. The key decision was made July 18, 2006, when the ESDC announced that it had "adopted" the General Project Plan (GPP) and "accepted" the Draft Environmental Impact Statement (EIS).
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In between, in October, the Internal Revenue Service (IRS) proposed new regulations to tighten tax-exempt bonds for sports facilities.
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Apparently, the regulations don't require action by an elective body.

A "governmental person (as defined in §1.141-1)" of the Treasury Regulations is "a state or local governmental unit as defined in §1.103–1 or any instrumentality thereof."

And what's §1.103–1? "[A]ny division of any State or local governmental unit which is a municipal corporation or which has been delegated the right to exercise part of the sovereign power of the unit."

In other words, a handful of appointees of Gov. George Pataki showed up at a meeting on July 18, 2006 and gave their OK to stacks of documents they hardly read--or didn't read at all. And that meant the project was on its way, even if the chronology sent by the city and state to the IRS was bogus.

Updated tax rules issued Tuesday limit the way tax-exempt bonds can be used to pay for sports facilities but don't block the New Jersey Nets, New York Yankees and New York Mets from using billions of dollars in bonds to help pay for their new homes, state and city officials said.

Under the new ruling, federal officials essentially gave a green light for the three sports arenas, among the world’s most expensive, to use tax-exempt bonds. But tax experts said that the ruling would not allow other governments to issue such bonds on behalf of professional sports teams. The rule was adopted on Monday by the Treasury Department and the Internal Revenue Service.

Still, the New York teams may have difficulty finding investors who will buy the bonds, given the current turmoil on Wall Street and in the credit markets.
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[Develop Don't Destroy Brooklyn spokesperson Daniel] Goldstein said it appeared to him that federal tax officials went out of their way to help the developer, which he said “makes no sense” when the federal government is in the midst of a costly bailout of the banking industry.

The new IRS regulations are here [Word doc]. They grandfather in any projects that had "preliminary approval" before October 19, 2006. The baseball stadiums were approved prior to then, though Atlantic Yards did not get a final approval until the end of 2006. Still, officials seemed to be under the impression that ruling cleared all three teams to qualify for tax-free bonds.

Also, here's Forest City Ratner pr guru Joe DePlasco's statement:

“We are of course very pleased with the Treasury Department regulation. The tax exempt financing was always part of the plan for the development of the arena and the regulation released today acknowledges that. The regulation will help us move forward with a project that is critical to the on-going economic vitality of Brooklyn and the City.”

The Empire State Development Corp. expects to issue an unspecified amount of tax-free bonds to fund the arena early next year, Warner Johnston, a spokesman for the agency, said.
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Nets owner Bruce Ratner is seeking up to $800 million in tax-free financing. The IRS ruling means New York state can issue the bonds, Johnston said.

The Brooklyn plans are being closely watched in New Jersey, where some elected officials have hoped the Nets will scrap their Brooklyn arena plans and move to the year-old Prudential Center in Newark or stay at the Izod Center in the Meadowlands.